SUPERMARKET GROUP TO SELL OFF FRESH & EASY

U.K. group finds format doesn’t work in the U.S.

People employed by Fresh & Easy in 200 stores across Arizona, California and Nevada

Tesco, Britain’s largest retailer by sales, is to pull out of the U.S., selling off its lossmaking Fresh & Easy supermarket chain after it failed to transfer its winning formula from the U.K. to the western states.

The supermarket group booked a loss of $1.8 billion for the U.S. misadventure, which helped send net profit for the year down 96 percent to $183 million.

Fresh & Easy employs about 5,000 people and has about 200 stores in Arizona, Nevada and California, including 17 locations in San Diego County.

Executives said the concept flopped mainly because Tesco opened the chain in 2007 just before the start of the economic crisis and misjudged the shopping habits of its target customers.

“It’s never easy to walk away from something,” Tesco’s chief executive, Philip Clarke, told the BBC. “The world is so different now from 2004 and 2005 when the research was originally taken. Who was shopping on a smartphone back then?”

Clarke hopes to sell the stores as a single unit in the hope of securing jobs. He said there was already interest expressed in the chain, but he did not name a buyer or price.

“We’re pleased to confirm there are no plans to close any portion of Fresh & Easy,” said Brendan Wonnacott, director of corporate affairs for Tesco.

While Tesco has done well with its range of compact Metro stores in the United Kingdom — built close to public transport links so shoppers can grab a few items of food on their way home from work — the idea did not translate well to the U.S. Though some shoppers liked the concept of meals that were ready to eat with minimal preparation, there simply weren’t enough buyers.

In the American west, most shoppers drive to supermarkets — sometimes just once a week — and will look for a broader range of products, said Marc Levinson, author of “The Great A&P and the Struggle for Small Business in America.”

Levinson added that Fresh & Easy wasn’t unique as a store, and Tesco didn’t have time to experiment and work through glitches because of shareholder pressure. The company also underestimated the amount of attention needed to deal with the quickly changing American market, he said.

“They clearly had the wrong model for the market they were in,” Levinson said.

The decision wraps up a painful expansion exercise for the retailer, but it isn’t the first international food chain to have trouble with the vast and diverse U.S. market. Companies from Canada, France and the Netherlands have failed to capture American customers. Aldi and Trader Joe’s, two chains owned by a German trust, are the exception.

At the same time, some analysts say the Fresh & Easy foray also caused Tesco executives to take their eye off the ball in Britain, the company’s core market. More than 60 percent of the group’s sales come from the U.K., where the company has 3,000 stores and employs more than 300,000 people.